Brisbane ball-winner Neale's playing future is undecided beyond this year as he mulls options following the public breakdown of his marriage.
The 33-year-old met last week with Lyon, who coached Neale at Fremantle from 2012 to 2018, in part to discuss the possibility of joining the Saints.
But Lyon on Saturday conceded there would be no reunion with the dual Brownlow Medal winner and premiership star at Moorabbin.
"It's just really not possible for us with our young players out of contract," Lyon told reporters after St Kilda's 13.9 (87) to 10.13 (73) win over Port Adelaide.
"Lachie and I spoke, he was great. We didn't miss out because it would've been something we could pursue.
"The relationship was strong and that could've got it done if we were in a position to do that, but we're not.
"I didn't want any noise for Lachie and his club and us in the middle of it. We're clearly out, so it's done."
Lyon admitted an emerging St Kilda midfield unit led by gun playmaker Nasiah Wanganeen-Milera isn't yet the finished product as they seek to climb into premiership contention.
But he wouldn't say whether the Saints pulling out of the race for Neale meant they weren't in a position to chase experienced recruits for next season.
"Lachie spoke about how much growth they've got and how much they've improved," Lyon said.
"But we're not where we want to be, so we've just got to keep getting better and develop more and more.
"We need more players, better players, and we're working hard to develop them.
"That takes a little bit of time, as we see around the league, but a few of them have come quick."
Collingwood were the first Victorian outfit to publicly express interest in Neale, after the prevailing thought was he would move to Western Australia if he left Brisbane.
Neale's estranged wife Jules moved to Perth with the couple's two children when their marriage broke down late last year.
Neale has also met with Essendon, while South Australian clubs are other possible options as he weighs the pull of family against football success and financial considerations.Â